Keith Pitt (Hinkler, National Party) Share this | Hansard source

In summing up, firstly, I would like to thank those members who have contributed to this debate.

I am proud to introduce the Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016, which amends our taxation laws to implement a range of incentives to drive economic growth and jobs in our transitioning economy. These measures will help encourage innovation, risk taking and an entrepreneurial culture in Australia. These measures comprise the heart of the government's National Innovation and Science Agenda, and represent its commitment to making Australia a more modern, dynamic, 21st century economy. These actions also go towards ensuring Australia remains one of the world's leading locations when it comes to doing business.

The National Innovation and Science Agenda contains complementary initiatives to ensure start-ups and innovation companies are supported at different stages of idea development, by aligning our tax system and business laws with a culture of entrepreneurship and innovation. The government is delivering on two commitments that form part of the National Innovation and Science Agenda. The first measure, schedule 1 to this bill, will amend the Income Tax Assessment Act 1997 to improve investment in early stage innovation companies. This will help entrepreneurs overcome a difficult stage in the financing life cycle, sometimes described as 'the valley of death' where many start-ups find themselves unable to meet their cash flow requirements.

The tax incentives for early stage investors measure will support investment in these early stages by attracting investors who can offer funding and business expertise that will assist with the development and commercialisation of innovative ideas. The tax incentives for eligible investors include a 20 per cent carry-forward non-refundable offset on investments capped at $200,000 per year. There will also be a 10-year exemption on capital gains tax for investments held in the form of shares in the early stage innovation company for at least 12 months, provided that the shares held do not constitute more than a 30 per cent interest in the early stage innovation company.

The tax offset will be available upon investment, not when the funds are used by the innovation company and any sale of the shares will be taxed on a deemed capital account basis. The eligibility criteria will ensure that the incentives are targeted towards companies that need it. For instance, criteria around incorporation, expenditure, assessable income and not being listed on any stock exchange, such as those prescribed under the Corporations Law, help ensure that investments go to start-ups. It is important that the government helps connect entrepreneurs with business expertise so that innovative ideas can reach the market through commercialisation. Innovation in Australia is dynamic. A regulation-making power is also included so the government can keep the measure up to date.

The second measure, schedule 2 of this bill, will amend the Venture Capital Act 2002 and the Income Tax Assessment Act 1997 to reform the arrangements for venture capital investments. This will attract greater levels of investment in growing companies and improve their international competitiveness. The complementary measure provides tax incentives for funding provided through venture capital limited partnerships, including early stage venture capital limited partnerships, to attract investments at the growth stage of development. At this stage entrepreneurs have often received initial funding but are not yet able to market themselves for public or broader investor buy in.

Although Australia has experienced recent momentum in this field, with over $600 million in venture capital raised or planned since 30 June 2015, this funding has been generally concentrated in the technology sector. The measure builds on this momentum to improve funding for promising projects in industries beyond the technology sector.

We are introducing new arrangements for venture capital limited partnerships and early stage venture capital limited partnerships. Notably, there will be: a non-refundable tax offset of 10 per cent of the value of new capital invested into early stage venture capital limited partnerships during the income year, an increase in the maximum fund size of early stage venture capital limited partnerships from $100 million to $200 million, improved access to funding from managed investment trusts, and broader and simplified rules for both venture capital limited partnerships and early stage venture capital limited partnerships.

The tax incentives will apply for the 2016-17 income year, once the bill receives royal assent. I can assure the member for Chifley that in framing this bill we consulted widely with a range of stakeholders—from experienced investors to start-up founders and industry bodies—to design these two measures in a way that attracts investment without creating unnecessary regulatory burdens. We are answering the call from industry. We are creating the ecosystem that Australia needs to succeed in the modern world. We are setting up the environment to reward our innovators and our entrepreneurs, who have the concepts and ideas to benefit jobs and growth for all Australians.

Backing innovation to drive productivity is part of the Turnbull government's economic plan to successfully manage our transition. The Turnbull government knows that our transitioning economy requires increased investment, and we will build the conditions necessary to succeed. This is another practical example of how the Turnbull government is acting to support the positive transition in our economy from the mining boom to the ideas boom. I commend the bill to the House.

Question agreed to.

Bill read a second time.

See this speech in context